© Reuters.
Investing.com – Most Asian currencies moved slightly on Friday as markets sought more signals about a US interest rate hike, while the Chinese Yuan and Japanese Yen were supported by speculation about government intervention in the currency markets.
A stronger-than-expected reading led to sharp losses in Asian currencies on Thursday, while the dollar stabilized on growing expectations that the Federal Reserve will continue to raise interest rates in the coming months.
The pair fell about 0.1% each in Asian trading, but were still on the verge of marginal gains for the week.
In contrast, most Asian currencies were set for weekly losses amid expectations that the gap between risky and low-risk returns will narrow in the coming months.
It was among the worst performers of the week, down 0.7% as clear signals from the Reserve Bank about a pause in the rate hike cycle reduced the currency’s appeal.
The Chinese Yuan and the Japanese Yen are supported by talk of intervention
Both were up slightly on Friday, supported by persistent speculation that Beijing and Tokyo will intervene in the currency markets to stem weakness in their currencies.
The yuan was also boosted by a series of strong midpoint reforms by the People’s Bank of China, which stabilized the currency despite a series of weak economic readings from China.
Last week, the Chinese government intervened in the currency markets for the first time in eight months, sending the yuan down recently as the country’s economic outlook worsened. Traders were watching for any further moves from Beijing, given that the yuan was trading well below the psychologically important Level 7.
While the Japanese yen did not witness any direct intervention, it also fell below the key 145 level against the dollar, amid a series of verbal warnings from Japanese officials about betting on the yen.
But the outlook for the yen looks bleak, especially as the Bank of Japan reiterated its plans to keep policy loose.
Focus on non-farm payrolls, raise bets for price hikes
The broader Asian currencies moved slightly as markets plunged ahead of schedule in key US later on Friday. It added 0.2% while it rose 0.3%, with both currencies poised to end the week flat.
Thursday’s payroll data saw markets increase their bets on a Fed rate hike in late July, with a nearly 92% chance of a 25 basis point hike being indicated.
With most Asian central banks pausing or winding down their rate hike cycles, higher US interest rates are likely to put more pressure on regional currencies in the coming months.
